On Monday, Evercore ISI adjusted its stance on Hilton Worldwide (NYSE:HLT), downgrading the hotel giant's stock from Outperform to In Line, despite increasing the price target to $200 from the previous $175. The firm's decision reflects the stock's significant appreciation since late October and its current valuation.
The firm noted that Hilton's stock has risen 32% since late October, now trading at 18 times the firm's projected 2024 adjusted EBITDA, which is above the historical range of 14 to 16 times. Evercore ISI acknowledged Hilton's earnings growth, with models predicting an increase of 9 to 10% year over year in EBITDA for fiscal years 2024 and 2025.
Despite the positive earnings outlook, the firm believes that the potential for low teens EBITDA growth in 2024 is already reflected in the stock's current price. The analysis also highlighted a weakening in Upper Midscale and Midscale domestic Revenue Per Available Room (RevPAR) as 2023 comes to a close, which affects 41% of Hilton's domestic rooms.
Evercore ISI expressed recognition of Hilton's high-quality level and its focus on organic unit growth, factors that contribute to the company's strong market position. However, the current stock valuation suggests that the market has already priced in the bull-case scenario for Hilton's performance in the coming year.
InvestingPro Insights
As Hilton Worldwide (NYSE:HLT) navigates the market with an upgraded price target from Evercore ISI, real-time data from InvestingPro provides additional context to the hotel giant's financial health and stock performance. With a robust market capitalization of $49.41 billion USD and a high gross profit margin of 73.61% over the last twelve months as of Q3 2023, Hilton's financial stability is evident. However, the InvestingPro Data also reveals a Price to Earnings (P/E) ratio of 38.64, suggesting a valuation that is on the higher side, which aligns with Evercore ISI's sentiment on the stock's current valuation.
InvestingPro Tips highlight Hilton's impressive gross profit margins, which is a testament to the company's efficient operations and pricing strategy. The stock's recent performance is also noteworthy, with a strong return of 24.47% over the last three months. These metrics are critical for investors to consider, especially when evaluating the company's stock for potential investment.
It should be noted that Hilton's stock is trading near its 52-week high at 99.4% of the peak price, and analysts predict that the company will be profitable this year. With a special New Year sale, InvestingPro is offering up to a 50% discount on subscriptions. For those interested in deeper analysis, use coupon code "SFY24" to get an additional 10% off a 2-year InvestingPro+ subscription, or "SFY241" to get an additional 10% off a 1-year InvestingPro+ subscription. With 16 additional InvestingPro Tips available, subscribers can gain a more comprehensive understanding of Hilton's stock performance and financial health.
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